By Anayeli Zavala, Esq.
In 2004, California passed the Private Attorney’s General Act of 2004 (“PAGA”), which allows California employees to file an individual claim for harm suffered under the California Labor Code and a non-individual, representative claim on behalf of other employees who have suffered the same harm. In PAGA lawsuits, the employees act as “private attorney generals” acting on behalf of the California Labor Commissioner, which allows employees to recover statutory civil penalties. PAGA claims have become very common and pose a threat to California businesses especially those with large labor forces.
When the Labor Code does not provide a civil penalty for a particular violation, PAGA sets a penalty of $100 for each employee per pay period for an initial violation and $200 for each employee per pay period for any subsequent violation. Claims that fall under PAGA include: (1) missed meal and rest break premiums; (2) unpaid expense reimbursements; (3) unpaid overtime; (4) inaccurate wage statements; and (5) waiting time penalties. PAGA penalties can add up rapidly.
Formerly, California courts refused to force employees who signed arbitration agreements with employers to arbitrate PAGA claims. However, in 2022, the U.S. Supreme Court decided a case called Viking River Cruises, Inc. v. Moriana in which it was decided that the Federal Arbitration Act (“FAA”) requires the enforcement of arbitration agreements even if there are individual PAGA claims. The Court also ruled that after an individual PAGA claim has been ordered to arbitration, the employee lacks standing to maintain PAGA claims on behalf of other employees. This decision was seen a major victory for California employers. However, the U.S. Supreme Court’s interpretation of employee standing relating to non-individual PAGA claims is not necessarily binding on California courts.
Recently, California Courts of Appeal have held that employees retain standing to pursue PAGA claims, on behalf of other workers, in court even if their individual PAGA claims are subject to arbitration. And the California Supreme Court recently agreed to hear a dispute over this in connection with a lawsuit involving Uber, in Adolph v. Uber Technologies, Inc. It will be of importance to California employers how the California Supreme Court rules on this issue, and whether the United States Supreme Court will ultimately have to review this area again. The California Supreme Court is expected to rule this August.
In the meantime, California employers should ensure that employee arbitration agreements are up to date and provide for enforcement of PAGA claims under the FAA and include class action waivers.
Anayeli Zavala, Esq., is an associate attorney with the law firm of Dunn DeSantis Walt & Kendrick. Anayeli’s practice is focused on the representation of businesses that are involved in litigation and in counseling business owners regarding employment law.
Dunn DeSantis Walt & Kendrick provides a broad spectrum of legal services to businesses of all sizes, from small, local start-ups and non-profits to large, national companies. DDWK’s real estate development and construction practice includes representing all segments of the development and construction industries on both private and public projects.
You can find additional information and resources related to helping business owners and their businesses on the DDWK website.
